Home Equity Loan FAQ:
Second Mortgage Questions

A home equity loan gives you a lump sum at a fixed rate with predictable monthly payments — like a second mortgage. A HELOC is a revolving line of credit with variable rates and interest-only payments during the draw period. Choose an equity loan for one-time needs and fixed payments; choose a HELOC for ongoing, flexible borrowing. Full comparison →

A home equity loan keeps your first mortgage intact and adds a second mortgage at a fixed rate. A cash-out refinance replaces your entire first mortgage with a new, larger loan — often at a lower rate but with higher closing costs. If your current mortgage rate is low, an equity loan may be smarter. If rates have dropped, a refinance could save you money. Full comparison →

Most lenders require a 620+ FICO score for approval. Best rates are available at 700+, and some lenders will accept 580+ if you have strong compensating factors like high equity, a low DTI ratio, or steady employment history. Full qualification guide →

Most lenders cap your combined loan-to-value (CLTV) at 85% — meaning your first mortgage plus the new home equity loan can't exceed 85% of your home's value. Some lenders go up to 90%. For example, on a $500K home with a $300K first mortgage, you could typically borrow up to $125K at 85% CLTV.

Home equity loan rates typically range from 7-8.5% for qualified borrowers. Your exact rate depends on your credit score, loan amount, CLTV, and loan term. Rates improve significantly at 700+ credit. Dream Financial Management shops 500+ lenders to find you the best available rate.

Home equity loans are flexible. Common uses include major home renovations, debt consolidation (paying off high-interest credit cards), medical expenses, education costs, large purchases, or investment. The interest may be tax-deductible when used for home improvements — consult a tax advisor for your situation.